Assume that there is an oligopoly consisting of firms of different sizes.If a small firm increases output by 25 percent,the price effect realized by the small firm will be ________.If a large firm increases output by 25 percent,the price effect realized by the large firm will be ________.
A) nonexistent; negligible
B) negligible; nonexistent
C) nonexistent; substantial
D) substantial; nonexistent
E) negligible; substantial

Question

Quizplus · Accepted Answer

In an oligopoly, firms are interdependent and any individual firm's output change can affect the market price. However, the price effect realized by a small firm will be negligible due to its small market share, whereas a large firm's output change can have a substantial price effect as it holds a significant market share. Therefore, the correct choice is E.

Assume That There Is an Oligopoly Consisting of Firms of Different